Broad-Reaching Prosecution Of Individuals Participating In Operations Of Companies Convicted Of Fraud Shows Risks Of Participation

Convictions Show Growing Fraud Enforcement Risks Reach Broadly To Broad Range Of Actors

Health care owners and employees at all levels should heed the lesson shown from the continuing successful prosecution by the Justice Department against individuals ranging from owners to marketing employees for their participation in a Medicare fraud scheme allegedly orchestrated by the owners and operators of American Therapeutic Corporation (ATC); its management company, Medlink Professional Management Group Inc.; and the American Sleep Institute (ASI).  The mounting guilty pleas and convictions obtained from individuals who participated in the execution of the scheme since the Justice Department secured guilty pleas from ATC, ASI and their owners shows that individuals electing to take part in aggressive Medicare referral or billing practices by their health care companies or other business partners stand a high risk of criminal prosecution if their organizations get caught engaging in health care fraud.  The successful prosecutions shows the readiness of the Justice Department to prosecute individuals at all levels of organizations for their participation in health care fraud activities even after obtaining criminal convictions against the corporations and principles who were the primary actors in the scheme.

Health Care Fraud Scheme Prompts Continuing Series of Prosecutions

ATC and Medlink pleaded guilty in May 2011 to conspiracy to commit health care fraud. ATC also pleaded guilty to conspiracy to defraud the United States and to pay and receive illegal health care kickbacks. On Sept. 16, 2011, the two corporations were sentenced to five years of probation per count and ordered to pay restitution of $87 million. While both corporations have been defunct since their owners were arrested in October 2010, the Justice Department has continued its prosecution of a broad range of other individuals that it charges participated in the scheme.

Following the announcement of a January 17, 2012 guilty plea from Miami-area health care marketing representative Sandra Jimenez,  Federal officials credit the investigation and prosecution activities of the Health Care Fraud Task Force with netting guilty pleas or trial convictions from ATC, Medlink and nine of the individual defendants indicted in February 2011 for their involvement in the alleged health care fraud conspiracy that the Justice Department claims resulted in the submission of $200 million in fraudulent Medicare claims. Other defendants are scheduled for trial on April 9, 2012. In addition to the prosecution of the criminal indictments, the Justice Department’s Civil Division also has filed a related civil action.

The guilty pleas, criminal convictions and other ongoing prosecutions stem from charges made against ATC, Medlink, ASI, Jimenez and several other parties in indictments unsealed on February 15, 2011 in the Southern District of Florida.  Jimenez was indicted along with ATC, Medlink, and various owners, managers, doctors, therapists, patient brokers and marketers of ATC, Medlink and ASI for various health care fraud, kickback, money laundering and other offenses in the February 15, 2011 indictments.

According to court filings, ATC, Medlink and ASI were all Florida corporations headquartered in Miami. ATC operated purported partial hospitalization programs (PHPs) – a form of intensive treatment for severe mental illness – in seven different locations throughout South Florida and Orlando. ASI purported to provide diagnostic sleep disorder testing.  ATC’s owners and operators paid kickbacks to owners and operators of assisted living facilities (ALFs) and halfway houses and to patient brokers in exchange for delivering ineligible patients to ATC and ASI.  In some cases, Justice Department officials say the patients received a portion of those kickbacks. Throughout the course of the ATC and ASI conspiracy, Justice Department officials say millions of dollars in kickbacks were paid in exchange for Medicare beneficiaries, who did not qualify for PHP services, to attend treatment programs that were not legitimate PHPs. ATC and ASI then billed Medicare for the medically unnecessary services. According to court filings, to obtain the cash required to support the kickbacks, the co-conspirators laundered millions of dollars of payments from Medicare.

Owners To Serve 91 Months To 50 Years In Prison & Ordered To Pay Millions In Restitution

Not surprisingly, the owners and principles of the convicted corporations were the first parties individually convicted for their involvement in the alleged scheme.  

Co-conspirator Margarita Acevedo, pleaded guilty on April 7, 2011, for her role in the fraud scheme. Acevedo was sentenced to 91 months in prison followed by three years of supervised release and ordered to pay more than $72 million in restitution, jointly and severally with her co-defendants.

On August 23, 2011, a jury found co-conspirator Judith Negron, one of the owners of ATC, guilty of all 24 felony counts charged in the February 2011 superseding indictment.

In September, 2011, Marianella Valera, the owner of ATC, was sentenced to 35 years in prison and ordered to pay  more than $87 million in restitution, jointly and severally with her co-defendants. Valera was also sentenced to three years of supervised release following her prison term. Meanwhile, another ATC owner, Lawrence Duran, was sentenced on Sept. 16, 2011, to 50 years in prison for his role in the fraud scheme. Duran’s sentence is the longest prison sentence ever imposed in a Medicare Fraud Strike Force case.  The sentencing came after Valera pleaded guilty in April, 2011 to 21 felony counts and Duran to 38 felony counts, including conspiracy to commit health care fraud, health care fraud, conspiracy to pay and receive illegal health care kickbacks, conspiracy to commit money laundering, money laundering and structuring to avoid reporting requirements.

In pleading guilty, Duran and Valera admitted that they orchestrated and executed a scheme to defraud Medicare beginning in 2002 and continuing until they were arrested in October 2010. Duran and Valera submitted false and fraudulent claims to Medicare through ATC.  Duran and Valera also admitted to using the related company, ASI, to submit fraudulent Medicare claims.

According to court documents, Duran, Valera and others paid bribes and kickbacks to recruit Medicare beneficiaries to attend ATC and ASI and billed Medicare for treatments purportedly provided to these recruited patients. According to court documents, the treatments were medically unnecessary or never provided at all. Duran and Valera supported the kickbacks through an extensive money laundering scheme that aimed to hide the illicit conversion of Medicare payments to cash. The defendants and their co-conspirators used advanced measures to hide their fraudulent activities from Medicare and from law enforcement.

As part of the fraud scheme, Duran, Valera and others paid kickbacks to owners and operators of assisted living facilities (ALFs) and halfway houses and to patient brokers in exchange for delivering ineligible patients to ATC and ASI. In some cases, the patients received a portion of those kickbacks. The defendants and their co-conspirators actively recruited ALF and halfway house owners and operators and patient brokers to take part in the scheme. Throughout the course of the ATC and ASI conspiracy, millions of dollars in kickbacks were paid in exchange for Medicare beneficiaries, who did not qualify for PHP services, to attend treatment programs that were not legitimate PHP programs so that ATC and ASI could bill Medicare for more than $205 million in medically unnecessary services.

According to the superseding indictment to which they pleaded guilty, Duran, Valera and others caused the alteration of patient files and therapist notes for the purpose of making it falsely seem that patients being treated by ATC qualified for PHP treatments. According to court documents, Duran and Valera also instructed employees and doctors to alter diagnoses and medication types and levels to make it falsely seem that ATC patients qualified for PHP services. Duran, Valera and co-conspirators caused doctors to refer ATC patients to ASI even though the patients did not qualify for sleep studies.

According to the superseding indictment to which they pleaded guilty, the defendants also engaged in a money laundering conspiracy to enrich themselves and to provide cash for the millions of dollars in kickbacks paid to recruit Medicare beneficiaries. According to court documents, Duran and Valera used another company they owned and operated, Medlink Professional Management Inc., to hide the health care fraud and kickbacks from Medicare and law enforcement. Once Medicare paid ATC and ASI for the fraudulently billed services, Duran, Valera and others transferred millions of dollars to Medlink. They and others opened phony corporations to receive checks and wire transfers from both ATC and Medlink to convert that money into cash for their personal enrichment and for the payment of kickbacks. According to court documents, Duran, Valera and others cashed checks at different bank branches and different locations to conceal the true purpose of their activities and to evade reporting requirements.

Referring Facility Owner Pompano Faces Up To 10 Years Imprisonment & $250,000 Fine At Sentencing

Previously in November, 2011, Justice Department officials announced that the owner and operator of a Florida assisted living facility, Joseph B. Williams, pleaded guilty for his role in the Medicare fraud kickback scheme associated with the ATC fraud scheme.  Williams admitted that in exchange for illegal health care kickbacks, he agreed to provide Medicare beneficiaries who resided at Avondale to ATC for mental health treatment through partial hospitalization program services.  According to court documents, Williams was paid approximately $30 per beneficiary per day the beneficiary attended ATC. In his plea, Williams knew that ATC fraudulently billed Medicare for the partial hospitalization program treatment that his referrals purportedly received.  Williams also admitted that he billed Medicaid for assisted living services purportedly provided at Avondale when, in fact, those services were never provided.  Justice Department allegations reflect Williams paid owners and operators of halfway houses to obtain the personal identifiers of Medicaid enrollees who resided in those halfway houses and used that information to bill Medicaid fraudulently and also also billed Medicaid for assisted living services provided to residents of Avondale at times when they were not receiving any services.

According to the plea agreement, Williams’s participation in the fraud resulted in more than $2 million in fraudulent billing to the Medicare and Medicaid programs.  At sentencing, scheduled on February 8, 2012, Williams faces a maximum of 10 years in prison and a $250,000 fine for each count.

Starter House Owner Nash Faces Up To 10 Years Imprisonment and $250,000 Fine When Sentenced

Barry Nash, the owner and operator of the Broward County, Florida-area halfway house, Starter House, pleaded guilty on January 5, 2012 to one count of conspiracy to commit health care fraud for his role in funneling patients through a fraudulent mental health company under the alleged fraud scheme.  

In his plea, Nash admitted that, in exchange for illegal health care kickbacks, he agreed to refer Medicare beneficiaries who resided at Starter House to ACT for purported intensive mental health treatment through a partial hospitalization program and to ATC for purported sleep treatment. Nash admitted that he knew that ATC and ASI would fraudulently bill Medicare for the PHP treatment and sleep studies that his referrals would purportedly receive. 

According to the plea agreement, Nash’s participation in the fraud resulted in more than $959,901 in fraudulent billing to the Medicare program. At sentencing, scheduled for March 8, 2012, Nash faces a maximum of 10 years in prison and a $250,000 fine.

Marketing Representative Jimenez Faces Up To 15 Years In Prison When Sentenced

Most recently, the Justice Department, HHS and FBI jointly announced on January 17, 2012 that marketing representative Sandra Jimenez admitted she participated in the alleged fraud scheme involving ATC, ASI and Medlink when she pleaded guilty to one count of conspiracy to commit health care fraud and one count of conspiracy to defraud the United States and to pay and receive illegal health care kickbacks.

In pleading guilty, Jimenez admitted that while serving as a marketer for ATC and ASI, she solicited beneficiaries and paid kickbacks to assisted living facility owners in exchange for the beneficiaries. The amount of the kickback was based on the number of days each patient spent at ATC.  Jimenez also admitted that she participated in a separate Medicare fraud scheme through Priority Home Health, a Miami home health agency that submitted fraudulent claims to Medicare for home health services . Jimenez and her co-conspirators recruited Medicare beneficiaries to Priority Home Health who did not qualify for home health services.

According to the plea agreement, Jimenez’s participation in the ATC fraud and the Priority Home Health fraud resulted in $46 million in fraudulent billings to the Medicare program.

Sentencing for Jimenez is scheduled for June 27, 2012.  She faces up to 15 years in prison and a $250,000 fine after pleading guilty to participating in a Medicare fraud scheme that Justice Department officials say resulted in the submission of more than $200 million in fraudulent Medicare claims.

Prosecutions & Convictions Show Participants In Health Care Fraud Activities Face High Risks

The zealous prosecution by the Justice Department of these and other parties who participated in the operation and furtherance of the health care fraud scheme highlights the advisability for all health care organizations and each individual working in or with health care organizations to exercise care to fully understand, and avoid participation, in aggressive activities that could be considered health care fraud. 

Act To Manage Risks

In response to the growing emphasis and effectiveness of Federal officials in investigating and taking action against health care providers and organizations and other individuals involved in their operations, health care providers covered by federal false claims, referral, kickback and other health care fraud laws as well as other parties who participate in their operations should act to manage their exposures.

Health care organizations should take clear steps to manage compliance.  Their management should make clear by policy and action their organization’s commitment to compliance.  They also should consider auditing the adequacy of existing practices, tightening training, oversight and controls on billing and other regulated conduct, reaffirming their commitment to compliance to workforce members and constituents and taking other appropriate steps to help prevent, detect and timely redress health care fraud exposures within their organization and to position their organization to respond and defend against potential investigations or charges.

Meanwhile, individuals also need to assume responsibility for managing their own involvement to avoid stepping into the potential health care fraud fire. 

Individuals should not assume that the prosecution of their corporations or their management leaders will insulate them from prosecution for their own participation in potential fraudulent activities will escape notice or prosecution.

 Parties participating in health care marketing, billing or other activities that may give rise to potential fraud activities should take steps to develop their own strong understanding of the types of conduct that HHS or federal or state fraud investigators or prosecutors are likely to consider fraud and to avoid participating in these activities.  Participants should take steps to resolve concerns about potential activities before engaging in conduct that might expose them or their companies to criminal or civil prosecution.    

Individuals and corporations who participate in the conduct of activities targeted for audit or enforcement scrutiny also should consider planning in advance for the possible need to defend their actions by documenting the appropriateness of their actions as well as planning for the costs of defense that are likely to arise if their actions are called into question by making arrangements for insurance, indemnification or other sources to adequately fund these costs.

For More Information Or Assistance

If you need assistance reviewing or responding to these or other health care related risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer, may be able to help. Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 24 years experience advising health industry clients about these and other matters. Her experience includes advising hospitals, nursing home, home health, rehabilitation and other health care providers and health industry clients to establish and administer compliance and risk management policies; prevent, conduct and investigate, and respond to peer review and other quality concerns; and to respond to Board of Medicine, Department of Aging & Disability, Drug Enforcement Agency, OCR Privacy and Civil Rights, HHS, DOD and other health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns.

A popular lecturer and widely published author on health industry concerns, Ms. Stamer continuously advises health industry clients about compliance and internal controls, workforce and medical staff performance, quality, governance, reimbursement, and other risk management and operational matters. Ms. Stamer also publishes and speaks extensively on health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her presentations and programs include a wide range of compliance, risk management and other workshops, programs and publications.

Her insights on these and other related matters appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.  You can get more information about her health industry experience here. If you need assistance responding to concerns about the matters discussed in this publication or other health care concerns, wish to obtain information about arranging for training or presentations by Ms. Stamer, wish to suggest a topic for a future program or update, or wish to request other information or materials, please contact Ms. Stamer via telephone at (214) 452-8297 or via e-mail here.

If you or someone else you know would like to receive future updates about developments on these and other concerns from Ms. Stamer, see  here.

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THE FOLLOWING DISCLAIMER IS INCLUDED TO COMPLY WITH AND IN RESPONSE TO U.S. TREASURY DEPARTMENT CIRCULAR 230 REGULATIONS.  ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, OR (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2012 Cynthia Marcotte Stamer, P.C.  Non-exclusive license to republish granted to Solutions Law Press.  All other rights reserved.

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